AI Summary of Article 242 Definitions
This Chapter provides key definitions pertinent to securitisation practices. A clean-up call option allows originators to repurchase underlying exposures once they fall below a specified threshold. Rated and unrated positions distinguish between securitisation positions with or without eligible credit assessments, while senior and mezzanine positions define varying levels of claim on underlying exposures.
Additionally, terms such as overcollateralisation and simple, transparent and standardised securitisation (STS) are crucial for understanding credit enhancement and regulatory compliance. These definitions shape the landscape of risk management and capital allocation in securitisation transactions.
Article 242 Definitions
For the purposes of this Chapter, the following definitions shall apply:
(1) "clean-up call option" means a contractual option that entitles the originator to call the securitisation positions before all of the securitised exposures have been repaid, either by repurchasing the underlying exposures remaining in the pool in the case of traditional securitisations or by terminating the credit protection in the case of synthetic securitisations, in both cases when the amount of outstanding underlying exposures falls to or below certain pre-specified level;
(2) "credit-enhancing interest-only strip" means an on-balance sheet asset that represents a valuation of cash flows related to future margin income and is a subordinated tranche in the securitisation;
(3) "liquidity facility" means a liquidity facility as defined in point (14) of Article 2 of Regulation (EU) 2017/2402;
(4) "unrated position" means a securitisation position which does not have an eligible credit assessment in accordance with Section 4;